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2 Utility Analysis
Let's recall : 2) Subjective concept : It is a psychological
concept. Utility differs from person to
1) Want denotes a feeling of lack of
satisfaction. person. This is due to differences in taste,
2) Wants are unlimited. preferences, likes, dislikes, nature, habits,
3) They are recurring in nature. profession etc. For example, stethoscope
4) They differ with age, gender, seasons, has utility to a doctor but not to a layman.
habits and culture. 3) Ethically neutral concept : The concept of
5) Utility is the capacity of a commodity utility has no ethical consideration. It is a
to satisfy human wants. In other words, morally colourless concept. The commodity
utility is the want satisfying power of a should satisfy any want of a person without
good. consideration of what is good or bad,
desirable or undesirable. For example, a
Introduction : knife has utility to cut fruits and vegetables
You have been already introduced to the as well as it can be used to harm someone.
concept of utility in class XI. This unit gives a Both wants are of different nature but are
detailed explanation of consumer’s behaviour. satisfied by the same commodity. Thus,
In practice, every individual tries to utility is ethically neutral.
satisfy his wants with available resources. 4) Utility differs from usefulness : Utility
It is true that all human wants cannot be is the capacity of a commodity to satisfy
satisfied fully at a specific time. Utility analysis human wants, whereas usefulness indicates
explains a consumer’s behaviour in relation to value in use of the commodity. For example,
maximization of satisfaction. milk has both utility as well as usefulness to
a consumer, while liquor has utility only to
Try this : an addict, but has no usefulness.
1) Make a list of 10 commodities which 5) Utility differs from pleasure : A
satisfy your wants. commodity may possess utility but it may
2) Make a list of 10 commodities which not give any pleasure to the consumer. For
satisfy the wants of particular individuals example, injection for a patient has utility
performing specific activities. For because it cures the ailment but it hardly
example, A chalk has utility for a teacher. gives any enjoyment or pleasure to him.
6) Utility differs from satisfaction : Utility
Features of Utility :
is a cause of consumption, satisfaction is
Following are the features of utility : the end result of consumption. They are
1) Relative concept : Utility is related to interrelated but still different concepts. For
time and place. It varies from time to example, a thirsty person drinks a glass
time and place to place. For example, (i) of water since water has the capacity to
woollen clothes have a greater utility in the satisfy thirst. Utility of water is the cause of
winter. (ii) sand has greater utility at the consumption and the satisfaction derived is
construction site than at the sea shore. the end result of consumption.
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